Monday, 2 November 2015

Student loan | New study: Average student loan balance at graduation hits record ...

Student loan | New study: Average student loan balance at graduation hits record ...

New study: Average student loan balance at graduation hits record ...

Posted: 02 Nov 2015 07:00 AM PST

President Obama's student loan bubble

The new study is discussed in The Federalist.

Excerpt:

Graduates from the class of 2014 can thank President Obama that they're exiting college with the highest student loan burden ever. They graduated with an average of $28,950 in student loans, according to a new study by the Institute for College Access and Success (TICAS).

[…]A recent study from the Federal Reserve Bank of New York examining how student loans rose between 2001-2012 concluded that the more government subsidizes education, the more colleges raise their prices.

The study explains:

Yearly student loan originations grew from $53 billion to $120 billion between 2001 and 2012, with about 90% of originations in recent years occurring through federal student aid programs. Against this backdrop of increased borrowing, average sticker tuition rose 46% in constant 2012 dollars between 2001 and 2012, from $6,950 to $10,200.

In the years examined, tuition increased about 55 to 65 cents for every dollar the federal government gave out in student loans or Pell Grants.

Surprise! A government program designed to lower the cost of education actually did the opposite. Once colleges saw they could rake in money from helpless taxpayers, they figured: "Why stop now?" Consequently, tuition has skyrocketed due to government involvement.

Under Obama's leadership, the U.S. Department of Education has increased the maximum Pell Grant award from $1,000 in 2008 to $5,730 for 2014-15. Additionally, it has doubled the number of students slated to receive these funds. If history is any indication, this expansion won't lower the cost of higher education. In fact, it will probably do the opposite.

What's more, increasing numbers of these loans aren't getting repaid. Currently, about 40 million people owe about $1.2 trillion in student debt. Last year, 11.8 percent of student loans subsidized by the government fell into default, which is bad news for taxpayers, who are left holding the bag.

Well, if the rate of defaults is increasing, then how come bankers are still giving out these loans. Glad you asked. It's not bankers who is giving out these loans with bank money. It's Obama giving out these loans with taxpayer money. You see, Obama nationalized the student loan system in 2010, so that anyone can now get a loan no matter what they study, and no one has any requirement that they study something that allows them to pay the money back.

Investors Business Daily explains:

In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

The cost savings didn't happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program's costs by $27 billion, or 30%.

What did happen was an explosive growth in the amount of federal student loan debt… The result of Obama's action is striking. In each of the past six years, federal direct student loan debt has climbed by more than $100 billion.

And since Obama keeps making it easier and easier to avoid repaying those loans, it's a problem that taxpayers will eventually have to shoulder.

The radically leftist New York Times, of all places, supports this view that big government is behind the rise in the cost of higher education (student loan bubble), just like big government was behind the housing bubble.

This is by Paul F. Campos, law professor at the radically leftist UC Boulder.

He writes:

[P]ublic investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. Such spending has increased at a much faster rate than government spending in general. For example, the military's budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher.

[…][F]ar from being caused by funding cuts, the astonishing rise in college tuition correlates closely with a huge increase in public subsidies for higher education.

[…]As the baby boomers reached college age, state appropriations to higher education skyrocketed, increasing more than fourfold in today's dollars, from $11.1 billion in 1960 to $48.2 billion in 1975. By 1980, state funding for higher education had increased a mind-boggling 390 percent in real terms over the previous 20 years. This tsunami of public money did not reduce tuition: quite the contrary.

[…]State appropriations reached a record inflation-adjusted high of $86.6 billion in 2009. They declined as a consequence of the Great Recession, but have since risen to $81 billion. And these totals do not include the enormous expansion of the federal Pell Grant program, which has grown, in today's dollars, to $34.3 billion per year from $10.3 billion in 2000.

The more money that is attached to students, the more money universities charge – simple. Taxpayers are on the hook for all these defaulted loans, as well as state funding of higher education, as well as the increase in Pell grants. And what is Hillary Clinton's response to all this? Why, to make taxpayers pay for college for everyone. Who do you think is going to pay for that?

Maybe we should be electing someone who actually knows how to make the costs of higher education go down so that students don't have to be stuck with these huge student loan balances.

How to Compare Student Loan Consolidation Rates and Choose a ...

Posted: 29 Oct 2015 12:50 PM PDT

When we talk about your student "loans" — plural — we mean this literally. The average student juggles seven loans with two to three different loan servicers. So the typical graduate needs to track a bevy of payment due dates, and might even be paying higher interest rates than necessary.

Making so many different loan monthly loans payments is complicated, too, leaving many borrowers searching for an easier way. But there's more to consolidation than just simplifying repayment.

Aside from dealing with many loans across multiple servicers, consolidating and refinancing student loans can save money on interest and lower monthly payments.

However, lots of lenders are eager to roll your loans into their portfolio, and it's often hard to know which bank to choose. The answer, though, depends on what you value most. Time? Money? Convenience? Support?

We can't make that decision for you. But we can help you compare student loan consolidation rates and other variables that will affect your loan repayment.

First, determine your goals for refinancing

There are several reasons to refinance your student loans. Borrowers goals may vary, so it's good to know exactly what you're looking for before researching and selecting a student loan refinancing lender.

Here are some goals you may have when refinancing:

1. Save on interest

Chances are, lenders view you as a lower-risk borrower now that you're out of school than when you were a freshman. Lenders reward lower-risk customers with lower interest rates. You can compare student loan consolidation rates to find the lowest rates and the greatest savings. Lower interest rates mean you'll pay smaller monthly bills, and spend less money on interest over the life of the loan.

How much less? Let's imagine you have $20,000 in student loans, at a 5% interest rate, which you're repaying over 120 months (10 years). Using a student loan refinancing calculator, you'll see your monthly payment is $212, and over the life of the loan you'd pay $5,455 in interest.

But if you could lower your interest rate to only 4% and keep the 10-year term, your monthly payment would drop to $202 and you'd pay $4,298 in interest over the life of the loan — a savings of $1,157.

2. Lower monthly payments

Private and federal student loans usually have a 10-year repayment term. But once you've got a job, lenders are more flexible with loan repayment terms, with some stretching as much as 25 years.

Longer repayment terms mean lower monthly payments. But you'll pay more in interest over the long run. Lower payments often are a good choice when you're starting out and cash is tight.

If you've got a little extra cash at the end of the month (if only!), you can always increase your payments or make an extra payment, which will reduce the time of your loan and the amount paid toward interest.

3. Remove Co-Signers

If you're trying to become an independent adult, you don't need the stress of having co-signers breathing down your neck about paying your student loans. Refinancing, especially if you've got a good job, can remove Mom and Dad from your student loans and the financial part of your life.

There may be other reasons you wish to refinance and consolidate, too, including switching student loan servicers, the need to make only one payment, and paying off student loans faster. No matter what your reasons, keep them in mind as you move on to the next step

Look for in a lender with an offer that accomplishes your goals

There are plenty of lenders willing to consolidate private loans, and it's sometimes hard to know which one to select.

First, read eligibility requirements, which differ with each lender. Most — not all — will refinance student loans only if you've graduated from college or a graduate program, have good credit, a steady job, and a favorable debt-to-income ratio.

If you qualify for refinancing, select a lender that offers terms that best suit your needs. The following is a list of loan features you should consider when making your decision:

1. Rates

Loan consolidation rates are all over the map, currently ranging from 1.9% to 8.65%, depending on your credit. Of course, you should compare student loan consolidation rates and choose a lender that will give you the lowest rate. But unless you've got a great job and a high credit score — unusual for people just out of school — you'll have to accept whatever rate you can get.

2. Loan Rate Types

Lenders typically offer fixed and variable rate loans. Fixed rates are usually higher than variable rates; but variable rates can start low and end up high by the end of the loan, although they have a cap. Whichever you select will depend on the monthly payment you can afford now, and how much risk you can tolerate regarding future rates.

3. Terms

Lenders offer loans you must repay over 5 to 20 years; some lenders will only go out 15 years. The longer the repayment time, the lower the monthly payment, but the more you will ultimately pay in interest over the loan's lifetime.

4. Eligible Degrees

Most lenders will let you consolidate private and federal loans for both undergraduate and graduate schools. However, most lenders want to see a degree before refinancing your loans. And some lenders only accept degrees from certain schools, so you'll want to check lenders' lists of eligible institutions first.

5. Unemployment Protection

Many lenders understand that newcomers to the job market often switch jobs frequently during their first few years as a working adult. A U.S. Bureau of Labor Statistics study of baby boomers found that people born from 1957 to 1964 held an average of 11.7 jobs from ages 18 to 48, holding an average of 2 to 3 jobs during later periods of their lives.

Lenders understand that job-hopping is a function of youth, and some will pause payments up to 18 months while you're looking for work. However, take into account the conditions when you can request deferment as it varies for each lender.

6. Loan Discounts

Most lenders will give you a .25% discount if you allow them to automatically deduct monthly payments from your bank account. Some lenders will give you another small discount if you maintain a bank account at their institution.

7. Co-Signer Release

Lenders know that neither you nor your parents want to be linked by debt forever. Some lenders will release co-signers if you make timely payments for 36 consecutive months.

Which Bank Should You Choose?

Which of these qualities are most important? Would you be willing to pay a slightly higher interest rate in exchange for unemployment protection or a co-signer release? Are you more interested in lowering your monthly payments or improving your loan terms?

We can't answer these questions for you. Your answer will depend on factors like your job prospects, income, family situation, and other personal considerations. Talk to a multitude of banks that are willing to refinance your loans and decide which one fits you best.

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